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I find your insights and questions quite enchanting. Your title, straight from Karl Popper, was magnetic to me, as what little I have read by Karl Popper, I found myself mostly agreeing with him. Your interest in trying to understand different opinions in not unlike my own. I did however, find one paragraph that seemed to me to be the underlying premise on which all else depends. That paragraph starts out :

The reason beliefs should be treated as revisable is that we are often guessing the way the world is, and need to update our guesses in the light of new information. Markets can be good for this, but not always.

On this we agree one hundred percent.. I also agree with you that :

In efficient markets, price reflects available information. But competition can lead to information being witheld (for the sake of competitive advantage) and there are market failures as well.

But in stating the above, depending on how broadly you choose to define your words, lies the failure of your insight. If you broadly define "competitive advantage" to include advantage to the advancement of personal beliefs and causes, and to the advancement of personal prestige and reputation (regardless of or without personal monetary or material benefit), then we agree. On the other hand, if what primarily comes to mind is the narrow "competitive advantage" as it is usually meant, that of monetary and business position, then your proposal to correct such informational deficiencies fails. As failure to include personal beliefs, causes, prestige and reputation, will lead to false assumptions and subsequent premises. When propagated, such failures feeds into the politics of envy and resentment. Thus:

The assumption of rationality in the markets is an idealization.

Where in fact, all we can ever have rationally speaking, is "markets." Obviously some markets will be closed and private, while other markets will be open and public. A distinction must be made here for clarity. Government markets can be both both public as well as private. An example of a private government market in operation, can be found any time a personnel executive or an employment board decides to hire a new government employee. Obviously the policies on which they operate have been public. But basis for the final decisions are private.

But in the ideal case, for econmies as well as scientifc systems, the end result should reflect all the available information.

In closing I would suggest to you that an open public free market will most always reach closer to rationality than any private government market. You may call this "assumption of rationality... an idealization," but can you provide a better method of arriving at the most complete and accurate information?

thank you, jackbob,

I agree there is a range of bad behaviors comprised in irrational economic behavior, and personal stakes may be included. But we also have the problems of insider trading, corruption, and socializing cleanup costs where there are unconsented to risks and costs borne by people who are not party to the transactions, and not beneficiaries of the gains. This I think is wrong. It is not necessarily covered by the laws on fraud, but it does affect markets by adding hidden costs. Secrecy in markets, just like secrecy in politics, creates space for bad behavior. I'm in favor of greater transparency in both markets and government. My guess is that we are agreed on that.